NEW YORK Aleris International Inc. has signed a definitive agreement to acquire Nichols Aluminum LLC, a wholly owned subsidiary of Quanex Building Products Corp., for $110 million in an all-cash transaction, Aleris said Feb. 10.
The acquisition will provide added supply chain flexibility by "combining complementary production capabilities," a spokesman for Cleveland-based Alerisa major producer of common alloy, high-recycled-content aluminum sheettold AMM.
"Nichols has a long history of producing flat-rolled aluminum sheet products for customers in a number of key industries across North America, and we look forward to continuing that long-standing tradition," Aleris chairman and chief executive officer Steven J. Demetriou said in statement, noting that "this acquisition is consistent with our strategy to expand our footprint and enhance our capabilities to ensure we are well-positioned to respond to projected growth in our key end uses as the economy begins to recover."
The move will help Quanex develop opportunities for both organic and acquisitive growth in its Engineered Products group. "This transaction will allow us to focus all our energies and capital on enhancing our position as a leading window and door component supplier, both domestically and internationally," chairman, president and chief executive officer Bill Griffiths said in a statement.
But Quanexs decision to divest Nichols goes far beyond strategies for growth outside of the aluminum sector. The company has been an outspoken critic of the current aluminum market, citing continued issues with tight spreads between London Metal Exchange aluminum prices and scrap prices.
Griffiths had said in December in response to a question about how Nichols fits strategically into Quanex that while Nichols was operating as well as it had in recent history, the company was still struggling with an aluminum market that was "severely depressing any efforts" made in terms of productivity
(amm.com, Dec. 18).
A fire at the companys Decatur, Ala., plant in November also impacted the cold mills rolling capabilities, and in recent months the company has indicated that it might need to outsource rolling capabilities at the facility. "Nichols is making the necessary repairs to return the facility to operation," the Aleris spokesman said.
Despite these issues, Aleris sees Nichols as "a good strategic fit with our business," he added, noting that Nichols "has a long history of serving customers in a number of key industries across the U.S."
The spokesman noted that "this acquisition is not related to automotive growth plans," and was more geared toward "expanding other areas of the business."
The spokesman declined to elaborate on plans for integrating Nichols existing scrap purchasing team, but noted that they "would be developing our integration plan as soon as possible. It would be premature to speculate on this at the present time."
Davenport, Iowa-based Nichols produces aluminum sheet for the transportation, building and construction, machinery and equipment, consumer durables and electrical industries in North America. The acquisition includes two production facilities in Davenport, a facility in Decatur, and another in Lincolnshire, Ill.